Wednesday, April 9, 2008

Yahoo+ Google: Serious Threat or a Ploy to Get Microsoft to Raise its Bid?

Today's news is that Yahoo and Google are exploring ways to work together. Reuters is reporting that Yahoo is exploring options with both AOL and Google as ways to show that its value is more than what Microsoft has offered so far.

This move by Yahoo just does not make sense for many reasons.

One: Any type of business linkages between Google and Yahoo will face lot more regulatory review than the proposed Microsoft-Yahoo deal.

Two: Even if there is no regulatory barrier, Yahoo's stockholders will have to decide that this deal will generate value more than the 60% premium that Microsoft has offered.

Three: In the long-term Yahoo will lose since Google will always have an upper-hand in the relationship. Google is strong and Yahoo is reaching to Google from a position of weakness, not one of strength. And finally,

Four: If Yahoo seriously thinks that the Microsoft offer is seriously undervalued, there is only one way to get Microsoft to raise its bid--sit down together and show in a systematic way how a higher price can be justified for Microsoft's shareholders (in addition to Bill G. and Steve B.). Going about in a roundabout way through half-baked pursuits with Google and AOL is not the way to get closer to potential colleagues.

Yahoo--Do not kick a gift horse in its mouth!

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